Incentives which are not performance based can fall flat–but the science shows that inspired rewards do not inhibit intrinsic motivation.

One of the central themes for this blog is the tremendous power of recognition and reward to increase engagement, drive behavior and motivate employees. Rewards, praise and community all play a role in this process—and the basic principles of social psychology, positive feedback and operant conditioning make it clear why this works.

But occasionally someone asks us about studies of intrinsic and extrinsic motivation that have come out of the education world, and they express fears that rewards might be bad for engagement.

In some criticisms of reward, educational scholars have argued that rewards may:

Decrease time spent on a task after the reward is removed

Inhibit self-determination and creativity

Decrease intrinsic motivation (where people engage in an activity primarily for its own sake)

Yet other scholars, largely from organizational psychology, have argued that recognition and tangible reward for effort will:

There has been a feisty debate about this question for some decades now. And it turns out that the devil is in the details—in particular in terminology and the types of experiments being conducted.

A while back, Professors Judy Cameron and W. David Pierce from the University of Alberta decided to clear things up. They compiled and analyzed two decades of studies to get to the bottom of this very question.

They found that rewards CAN be detrimental—but only under very specific circumstances. They found that “when subjects are offered a tangible reward (expected) that is delivered regardless of level of performance, they spend less time on a task than control subjects once the reward is removed.” (The emphasis here is mine.)

It turns out, when studies show that rewards are bad, it is because the researchers are lumping together expected incentives with inspired rewards and often ignoring performance altogether. This makes complete sense. As we know from our own experience, there is a wide difference between a “tit-for-tat” expected incentive that is not based on performance, and an organic reward from a manager or peer who has been genuinely inspired by your great performance. This is why we steer clear of leaderboards or quota-based gamified recognition, for instance. (They may have a place in pure incentive contests, but not in recognition, in our view.)

A few years after that first analysis, Cameron and Robert Eisenberger from the University of Delaware published another paper, in which their examination of the research literature concluded that: “Our analysis of a quarter century of accumulated research provides little evidence that reward reduces intrinsic task interest.”

All this shows that there is no reason to think of intrinsic and extrinsic motivation as antagonistic. In fact, extrinsic and intrinsic motivators work well together, as we see very clearly in our own recognition and reward data. This is also echoed in the scholarship. A study at UC Berkeley found that: “far from being incompatible, intrinsic and extrinsic reasons for learning are both encouraged by tangible rewards.”

So, according to these analyses, when properly designed to be inspired and performance-based:

Rewards do not reduce intrinsic motivation.

Rewards do not limit creativity.

Rewards do not reduce our willingness to spend time on tasks.

You may be wondering, then, what ARE the effects of spontaneous, performance-dependent, tangible rewards? Here are three that come from the research:

Rewards make us feel more competent: According to Cameron: “A tangible reward that one perceives as being deserved for successful performance of an activity is likely to maintain or enhance the perception of self-competence without undermining feelings of self-determination.”

Rewards make us more willing to perform tedious tasks: A related 2001 study showed that “rewards can be used to enhance time and performance on tasks that initially hold little enjoyment.”

Rewards make us more creative: According to Eisenberger and Byron (2011), reward for creativity increases creativity when recipients clearly understand that creativity is a goal. (Rewards expressly for high performance also increase creativity—but to a lesser extent.)

I hope that this synthesis has been at least a little helpful in resolving any lingering concerns you might have about the role of tangible rewards in building a motivated, satisfied and engaged workforce.

If you have any other questions about best practices, I recommend you have a look through our Recognition Blueprint guide to best practices.

2 Responses to Are Rewards Demotivating? Myth and Reality

Wonderful article. I’m a believer, but I have questions. Specifically from the Blueprint. Inititial reaction – WONDERFUL. Then I come to #11 “Leave Cash on the Table”. There is the graph “What is Most Meaningful?” with wonderful stat regarding the wasted spend of giving employees cash for recognition. Get it. Next to that “50% Gift Cards”. NOW I have questions. Incentive Magazine reports in a survey the primary benefit of giving gift cards (as employee recognition) is “ease of admnistration” while responding that they are LESS effective than cash. http://www.incentivemag.com/Resources/Research/Articles/2013-Gift-Card-IQ/ If cash according to Globoforce is a poor choice what does this say about gift cards? The answer provided to me in a recent Recognition Professionals International conference seminar was that it depended upon HOW a gift card was presented and if it was to a reatailer/business of interest to the employee. Again, I have questions. Incentive Magazine also reports that most gift cards are used for necessity purchases. (http://www.incentivemag.com/Gift-Card-Programs/Retail/Articles/Study–Majority-of-Consumers-Use-Gift-Cards-for-Necessities/). Doesn’t that sound an awful lot like what cash is used for? If cash doesn’t cut it, and gift cards are ultimately used as cash – what does this say about the true effectiveness of the use of gift cards as a recognition tool beyond the immediate gratification (that cash would also provide) and the ease of giving to the giver (the employer)?

Good questions Gerd! Incentive has reported on both sides of this particular issue. They had a 2008 survey that found gift cards significantly more effective than cash in motivating employees. It is certainly true that gift cards make administration easy, and that if properly administered they can really help companies ensure compliance. But they are also the most effective method for motivation.

Here’s our take on the cash vs gift cards issue… Cash is less impactful because it isn’t sticky. People always express an interest in it–for sure! But once it arrives it is assimilated and forgotten. It goes into a bank account and disappears–often being spent on bills. In fact a survey by Wirthin Worldwide showed that of employees who got cash 29% spent it on bills, and 18% didn’t remember how they spent it. 11% bought gifts, 11% bought household items, 9% got a special treat, 11% put it into savings, 5% went on vacation and 2% did something else. (15% reported never having got a cash award, to round out those numbers.)

By contrast, a gift card (not a cash card, mind you) ensures that employees are going to choose something that will be more meaningful and leave a lasting impression. Gifts of a wide choice of merchandise can also have this level of impact, where employees choose something meaningful to them that will serve as a reminder of their good work and help to maintain that emotional connection to their organization.

I would argue that gift cards are indeed the MOST effective at this, because you get a triple dose of positive feeling from them. There is the moment of receipt of the award, which generally elicits feelings of pride and happiness. Then there is the moment of redemption for a card, which revives those feelings. And then you have the moment of purchasing the gift with that card, which for a third time revives feelings of pride and affinity for the organization. And unlike cash spent on bills–that item or experience (photos, etc) becomes a tangible symbol of achievement and engagement.